Leaderboard
Leaderboard

Shippers switch to expensive air freight due to US port congestion

Shippers switch to expensive air freight due to US port congestion
Port congestion has led shippers to consider switching to air Credit: Dean Morley

Research into current US West Coast port congestion by maritime advisory company, Drewry, indicates that shippers are paying high prices to switch their transport from ocean to air for the holiday season.

The diversions are generating expensive costs because air rates are at their seasonal highpoint of the year and the addition of cargo, usually moved by sea, is increasing demand.

The report said: “Congestion on the US West Coast ports is a costly reminder to shippers of the need for risk planning, particularly in peak seasons. The issue will help to inflate air rates and demand temporarily, but it will not reverse the longer-term trend towards ocean.”

The shipping consultants added: “The backlog at US west coast ports has the potential to soften the traditional drop in Asia to US rates in December and depending on how long the issue remains unresolved could prop up air rates through until Chinese New Year.”

After four months of stability, East-West air freight rates leapt in October with Drewry’s East-West Air Freight Price Index rising by 11.9 percentage points to a year-peak of 115.6 points.

Continued strong peak season demand plus added demand derived from the conversion from ocean transport provided the second highest index level since the data series started in May 2012.

Drewry’s research also revealed that the Asia to US route was responsible for the largest overall hike in East-West air freight rates with the Transpacific Eastbound Air Freight Rate Index up by 17% against September.

Contrastingly, container freight rates on the route slipped with the Drewry Transpacific Eastbound Freight Rate Index falling by 7% in October.

Some shippers have begun to use Asia to US East Coast services instead of the West but this is not a comprehensive solution as the average sea transit time between Shanghai and New York takes 15 days longer than the journey from Shanghai to Los Angeles.

Additionally, data from the World Container Index shows that Eastbound Transpacific freight rates per 40ft container are $2,100 higher on the Shanghai to New York route than between Shanghai and Los Angeles. This gap has risen from $1,500 in June.

Overall supply issues in the container sector such as poor reliability and poor congestion are affecting the modal shift from air to sea according to the consultancy.

However, the report suggests that the current trend of diversions from sea to air will only be temporary due to underlying strengths in favour of sea transport.

These include a higher demand for commodities typically shipped by ocean freight, faster growth at the low-value end of commodities such as T-shirts, reducing air cargo’s overall share and finally the sea conversion of “mature” products.